Upload
liliana-hines
View
215
Download
0
Tags:
Embed Size (px)
Citation preview
Why Model?
Focus on key aspectsPerform “What if?” (sensitivity analysis)Make predictionsImprove (shared) understandingReduce uncertaintySolve problems…
19/04/23 3
Good models
Are parsimoniousHave just enough variables to explain the
variationToo many variables create complexity and
confusion and may mislead (model is overfitted)
Too few variables don’t explain (model is underfitted)
19/04/23 4
Good models ctd.
Provide explanationGive accurate predictionsCorrelate with the “real world”
Have face validityAre scalable, extensibleUnderstandable by others
documentation
19/04/23 5
19/04/23 6
Modelling
financialforecastingsimulation/risk analysisMCDM (multi criteria decision making)goal seeking/optimisation/linear
programming
19/04/23 9
Financial models
“adjusting for the time value of money based on interest, depreciation, inflation rates”
NPV (net present value)IRR (internal rate of return)DCF (discounted cash flow)Amortisation (loan repayments)
19/04/23 11
Forecasting
“predicting future values based on past patterns of a time series”
trendregressionexponential smoothingdecompositionBox Jenkins
19/04/23 13
Simulation/Risk Analysis
“either the modelling of a process or a form of sensitivity analysis where many “what ifs” are performed”
Systems Dynamicsdynamic based on store/flow/controldifference equations
19/04/23 14
Simulation/Risk Analysis
Monte Carlovariation of given variables according to an
assumed statistical patternstatic
Example software@Risk by PalisadeWorks with Excelhttp://www.palisade.com.au/risk/
19/04/23 16
Simulation/Risk Analysis
discretesnapshot of model is triggered by an event
continuoussnapshot of model is triggered at regular time
intervalsvisual
interface iconic
abstract .... real
19/04/23 17
Regression
statistical modeldependent, independent variablesmay be time basedsoftware
See excel statistical functions andData analysis toolpack add-in
19/04/23 19
MCDM (multi criteria decision making)
“exploration of the pain and gain associated with different alternatives”
alternativescriteriarating of alternativesweighting of criteriaexploration
19/04/23 20
MCDM ctd
SoftwareHiview3 by Catalyze
http://www.catalyze.co.uk/resources/docs/pdf/Catalyze_Case_Study_Shampoo.pdf
See next slide copied from the above pdf
19/04/23 22
Goal Seeking/Optimisation/Linear Programming
“either the search for the pattern of variables that will lead to a goal or the pattern of variables that will optimise a goal under given constraints”
SoftwareGoal seek (in Excel “What if Analysis”)Excel Add In – Solver (optimisation under
constraints)
19/04/23 26
Sensitivity Analysis (“What if”)
“The performing of “what if” analysis in a given model through varying underlying variables”
fixed valuesinterval/incrementsaccording to a statistical pattern